2015 (1) TMI 288 - AT - Income Tax

Deduction u/s 54F - Long term capital gain - assessee submitted his explanation giving details of expenditure incurred on construction, but the Assessing Officer disbelieved it by holding that the assessee has not submitted any evidence relating to credits in the bank accounts, money received on giving plot for development - whether the assessee has invested the capital gains in construction of new house property so as to claim deduction u/s 54F of the Act - Held that - when the assessee has contended before the Assessing Officer that he has invested the capital gains derived from sale of flats in the construction of the house property without properly verifying the assessee s contention, the Assessing Officer was not justified in rejecting the claim of deduction u/s 54F of the Act on presumptions and surmises. On a specific query made by the bench, the assessee had produced the municipal tax receipt of the house in question, investment for which was claimed as deduction u/s 54F of the Act. On a perusal of the said receipt dated 24/12/2013 prima facie it appears that a house exists in door No.15-6-190/1/J, against which the assessee has claimed deduction/s 54F of the Act. When the Assessing Officer does not dispute the fact that the assessee has derived capital gains from sale of flat, then the fact that this was utilised for construction of the house cannot be disbelieved, when no contrary material has been brought on record to show that amount was utilised in any other manner. Since, the aforesaid municipal tax receipt was not produced either before the Assessing Officer or before the CIT (A), we direct the Assessing Officer to verify the original municipal receipt and allow the claim u/s 54F of the Act. So far as addition of short term capital gain of ₹ 1,67,000/- is concerned, since the assessee himself has admitted such income, there is no reason to interfere with the same. In view of our above findings, other grounds raised by the assessee have become infructuous and hence dismissed as such. - Decided partly in favour of assesse.

Summary

Issues:
Assessment of deduction under section 54F of the Income Tax Act based on investment in construction of a house property.

Analysis:
The appeal was filed against the CIT (A)'s order regarding the assessment year 2003-04. The assessee, an individual, declared a total income of Rs. 18,000 with long-term capital gain of Rs. 7,62,800 claimed as deduction under section 54F for investment in a house property. The assessment was reopened based on a development agreement cum GPA for a plot. The Assessing Officer disallowed the deduction as the assessee failed to provide evidence of credits in bank accounts or sources for construction costs. The CIT (A) proceeded ex parte and upheld the disallowance citing the onus on the assessee to prove necessary facts for claiming deductions. The AR argued that all details were submitted, but the Assessing Officer did not verify the construction. The Tribunal found that the assessee had replied to queries, provided details of expenditure, and produced a municipal tax receipt during the hearing. The Tribunal directed the Assessing Officer to verify the receipt and allow the deduction under section 54F. The addition of short-term capital gain was upheld as admitted by the assessee. Other grounds raised by the assessee were dismissed as infructuous.

The main issue was whether the assessee had invested the capital gains in constructing a new house property to claim deduction under section 54F. The Tribunal found that the assessee had responded to queries, furnished details of expenditure, and produced a municipal tax receipt during the hearing. The Assessing Officer's rejection of the deduction based on presumptions without verifying the construction was deemed unjustified. The Tribunal directed the Assessing Officer to verify the municipal receipt and allow the deduction under section 54F. The addition of short-term capital gain was upheld as admitted by the assessee.

The Tribunal observed that the Assessing Officer should have physically verified the construction instead of rejecting the claim based on presumptions. The CIT (A) disposed of the appeal ex parte, upholding the Assessing Officer's order. The Tribunal found that the assessee had provided necessary details and produced a municipal tax receipt during the hearing, indicating the existence of the house property claimed for deduction under section 54F. The Tribunal directed the Assessing Officer to verify the receipt and allow the deduction. The addition of short-term capital gain was upheld as admitted by the assessee. Other grounds raised by the assessee were dismissed as infructuous.